Australia’s Cost-of-Living Squeeze Drives ‘Baby Recession’

(Bloomberg) — Australia’s prolonged inflation and elevated interest rates have spurred a “baby recession,” with births plummeting to the lowest level since 2006, analysis by consultancy KPMG showed.

In 2023, 289,100 babies were born in the country, 4.6% fewer than the previous year and down from a 2021 post-lockdown spike of 315,200, KPMG Urban Economist Terry Rawnsley said in a report on Wednesday. While weak economic growth traditionally weighs on births, current cost-of-living pressures are having a particularly strong impact, he said.

“Birth rates provide insight into long-term population growth as well as the current confidence of Australian families,” he said. “We haven’t seen such a sharp drop in births in Australia since the period of economic stagflation in the 1970s, which coincided with the initial widespread adoption of the contraceptive pill.”

Australia’s economy has slowed to a crawl this year under the weight of high interest rates, with sticky inflation prompting speculation the Reserve Bank will tighten further. Most Australian borrowers are on floating rates meaning that any hike quickly flows through to higher monthly repayments.

“With the current rise in living expenses applying pressure on household finances, many Australians have decided to delay starting or expanding their families,” Rawnsley said. 

This comes against the backdrop of a long-term decline in the nation’s total fertility rate, which slid from more than two children per woman in 2008 to 1.6 in 2023, he added.

Despite the decline in births, Australia’s population growth has actually surged in recent years, underpinned by immigration.

©2024 Bloomberg L.P.